It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)

Saturday, February 19, 2011

Hewers of Wood, Drawersof Oil

This headline once again reveals the untainted truth; China is a capitalist nation and as a world power of capital is Imperialist.

Regardless of the ideology proclaimed by the state, the fact is that China is a capitalist economy; even if it is a state capitalist one.

As Herr Dr.Marx points out it's about the relationships we have to the means of production, who controls it and who doesn't. In other words once you have industrial production and capital in perpetual production by a working class, capitalist society exists, regardless of its political superstructure. The transformation of peasants into an urban proletariat is the key function of capitalist means of production. And China fits that description as much as England did in the late 18th Century or America in the late 19th Century.

The irony in the relationship between Canada and China is that they are both state capitalist economies. One is more bourgeois democratic, the other is based on an authoritarian command economy. However the state, is crucial in both political economies in determining national interests.

In the case of Canada we are once again being the hewers of wood and drawers of water, a resource based export economy to developing industrial economies. Today we are hewers of wood and drawers of oil.

This is reminiscent of the original colonial model of Canada vis a vis France and Britain, and then our relationship with America. Now we deal with a modernizing industrial China, as their new resource base as we sell off our manufacturing to other global capitalists.

French Canada was initially a colony of resource extraction, not a colony of settlement. During brief periods when settlement became paramount, Canada was a theocratic society, reminiscent of modern Iran. And when settlement and development was finally pushed determinedly, Canada became a laboratory inwhich Jean Baptiste Colbert, the father of French mercantilist economics, tested his theories with development schemes similar to Third World misadventures in the 1960s.

The irony is that the current Federal government in Canada is politically opposed to China, yet they espouse the virtues of free trade, going so far as to call themselves libertarians on this matter. But the fact is that the Harpocrites right wing ideology belies the political economic reality which is Canada, it has always been a state capitalist nation.

However the nature of Canadian political economy belies any true tradition of free trade. It evolved from mercantilism to state capitalism, without the problematic tendencies of free trade.

The first share capital corporations were the North West Company of Fur Traders, and the Hudson Bay Company, fur trading companies that still were mercantile, not really free enterprise. They relied on being monopolies. In fact all of the early capitalist development in Canada was monopoly mercantilism run by a few families. Whether it was fur trading or canal building.

Henry Hudson’s 1610 claim for Britain to the lands around Hudson’s Bay lay unexploited until 1670, when Charles II granted his cousin, Prince Rupert, a fur trade monopoly and rechristened the region Rupertsland. Rupert organized The Company of Adventurers of England trading into Hudsons Bay (a.k.a.The Hudson’s Bay Company, or ‘the Bay’), a joint stock company, to raise funds.10 The forts, trading posts, and ships required - as well as the risks inherent in the fur trade - were beyond the resources of even the wealthiest individual families. Thus, the Hudson’s Bay Company, like the British East India Company and the Dutch East Indies Company, was among the first joint stock companies formed.

In 1779, British and Loyalist merchants in Montréal established theNorthwest Company to compete with the Hudson’s Bay Company for the fur trade, contesting the legitimacy of the latter’s monopoly. The original founders of the Northwest Company included Simon McTavish, Todd and McGill, Charles Grant, Benjamin and Joseph Frobisher, the firm of McGill and Patterson and five other merchants and firms.15 The resulting wealth gave the same names prominence inbanking, shipping, and railroad promotion decades later. Since the Hudson’s Bay Company had its own militia, the Northwest Company needed one too.Their battle for market share is best described in military terms.

During this period, the most entrepreneurial regions of British North America were the Maritime Colonies – Nova Scotia and New Brunswick. Abraham Cunard, a master carpenter, arrived in Halifax in 1783 and rapidly established stores, mills, lumbering, sawmills, shipbuilding, an accounting firm, and other businesses. Despite strong competition from other “timber barons” like Gilmour, Rankin, & Co.,Philemon Wright & Sons, William Price, and John Egan, A. Cunard & Son prospered. Many timber barons, including Christopher Scott, John and Charles Wood, and the Cunards, expanded into shipbuilding and shipping. Bliss (1986, p. 135) remarks that all of these fortunes were technically founded on theft, for the timber was almost all harvested from Crown land. The Cunard Line prospered,especially after it obtained a monopoly on delivering the Royal Mail between Britain and the Americas.

The biggest enterprises in Upper Canada in the early 19th century were canals. The government built the Rideau Canal from the Ottawa River to Lake Ontario. William Hamilton Merritt organized the Welland Canal, linking Lake Erie and Lake Ontario, as a joint stock company controlled by the Family Compact. After providing generous state subsidies and loans, the Upper Canada government finallybought out the owners of the failing venture in 1841. The newspaperman William Lyon Mackenzie charged that the whole project was a scam to enrich the Family Compact. Upper Canada’s public finances never recovered.

The creation of both the CPR and CN rail companies was facilitated by the Canadian State, including early on in the last century when immigration was promoted to help develop Rail lands.

Economic expansion paralleled an immigration boom. Under Laurier, Canada’s population rose 44%. Western Canada was rapidly populated along the proliferating transcontinental CPR system. All sectors of the economy grew rapidly and simultaneously to accommodate this infrastructure investment,and the millions of new consumers flooding in. The situation thus closely resembles what Murphy et al. (1989) call a big push – rapid development sustained by the simultaneous expansion of many interdependent sectors, so demand for intermediate and final goods grows apace with their supply.The railway, and the immigrant settler farms springing up around it created an economic low pressure zone. Every sort of new business was needed to supply the railroad, the settlers, and all the othernew businesses opening to serve them.

Canada's corporate structure was always mercantile state capitalism. In fact the origin of the Canadian State coincides with the development of the Railways.

The colony’s political leaders felt hamstrung by their inability to subsidize such new ventures. Francis Hincks, an entrepreneur and Member of Parliament, partially solved this problem with a new Municipalities Act, which let towns float debt. A more complete solution appeared in 1849, when Canada began guaranteeing railroad debt, but only if prominent politicians, such as Hincks and Galt, wereon the board to “guarantee good management.” After a brief financial crisis in 1849, a boom and bust in railroad stocks ensued, and railroad construction resumed on a grand scale. Although railroads built honest fortunes, like that of the engineer Casimir Gzoski, corruption was endemic. Sir Allan NapierMacNab, president of the Great Western Railway, served Canada as chair of the Parliamentary Standing Committee of Railways and Telegraphs. The grandest project, the Grand Truck Railroad, run by Prime Minister Hincks, was ineptly built and almost unusable. A British lobbyist hired by Hincks to lobbymembers of parliament wrote:I do not think there is much to be said for Canadians over Turks when contracts, places, free tickets on railways, or even cash was in question.A Barings investigation exposed rampant fraud, kickbacks, and deceit; and Barings blocked further Canadian listings in London to obtain a veto over additional debt financing and guarantees in 1851. This merely tested the ingenuity of the colonial political elite in circumventing such checks. Railway subsidies became a top government priority. According to Naylor (1975), railroad construction andfinancing in colonial Canada were “appalling even by the standards of the day.” Virtually every important politician now moonlighted as a railway officer or director, and railway subsidies both enriched political insiders and drained government coffers. Current, past, and future Prime Ministers FrancisHincks, Alexander T. Galt, and John A. MacDonald, respectively, and most of their cabinet ministers all had railway financial ties. In 1858, Alexander Galt, now Finance Minister, subordinated Canada’s sovereign debt to railroad common stock and raised the tariff to obtain funds for larger railway subsidies. By the 1860s, Canada had both a shoddily built, poorly run railroad system and a near bankruptgovernment.Now, only union with the solvent Maritime colonies of Nova Scotia and New Brunswick promised fiscal rescue. When the United States abrogated the Reciprocity Treaty in 1866, Galt lowered the tariff slightly on manufactured goods to match those of the Nova Scotia and New Brunswick colonies,in preparation for their union with Canada. In 1867, British investors blocked New Brunswick and Nova Scotia financing in London to force such a union. The resulting confederation was the Dominion of Canada, a self-governing entity within the British Empire. Canadian independence is usually dated to 1867, though Responsible Government came earlier and Canada remained within the Empire long after. Since the Canadian parliament assumed almost all of the powers of the parliament in London in 1867, this date is probably more appropriate than any other.

When it comes to politics those who complain that China is a one party state overlook the fact that Alberta is a One Party State as well. The longest running one party state in North America! And of course Alberta as a resource based economy, is looking to China to sell to.

Like Albertans the Chinese people believe they have a peoples government. Like those on the right who mythologize Alberta's history as a perpetual enclave of right wing individualism, those in China believe that their way of life is good and it is thanks to the government.Even if like in Alberta, it is a minority that elects the government.

ZACHARY KARABELL:Right now, the Chinese government is a good government in that it's providing more affluence to more people in a way that, from anything you can glean, many people in that particular society find minimally acceptable. But I don't know if we would say that's good governance.

IAN BREMMER:You don't get to vote in China. Yet many of them seem reasonably happy with the government they have had for the last 30, 40-plus years. We're going to have to address that.

One interesting point that I want to throw out. I was with Tony Blair a few months ago. He was talking about the fact that we needed to step up and really show our leadership in the G20 and all the rest. My response was, as I raised at the beginning of this question, "The Chinese are much happier with their government today than a lot of us sitting around the table are with our own. How do you address that? How do you respond to that?"

Tony Blair said, "When you look around the world, you see that people want democracy. It's a very tough question, but ultimately, the Chinese will come around; when they get richer, they're going to understand that we have the right system."

Yep just like Alberta, we might eventually have a real democracy here to.

Without an industrial policy in Canada, we will continue to be hewers of wood, and drawers of water and oil. And despite the hang wringing from the right wing about human rights in China, capitalism has no such qualms about making deals, after all the only thing that matters is the bottom line. Without developing secondary and tertiary industries and new industries, we will remain a resource economy with all the flaws that brings.